In this course, you will explore how to use accounting to allocate resources and incentivize manager and employee behaviors in using these resources. You will also learn how financial and non-financial accounting information facilitates strategic performance measurement and how to integrate this information to continuously improve strategy.
Upon successful completion of this course, you will be able to:
• Understand the role of managerial accounting information in common business decisions
• Differentiate relevant and irrelevant information
• Avoid common pitfalls in business decisions
• Prepare a master budget and its key components
• Describe the iterative and interrelated nature of budgeting
• Evaluate capital investments via a variety of measures
• Understand how upper management uses variance analysis
• Calculate, interpret, and investigate variances
• Understand decentralization and its advantages and disadvantages
• Compute and interpret financial performance measures
• Communicate the role of non-financial measures and strategic performance measurement systems
• Identify issues associated with performance measurement and incentives
• Understand the nature and role of subjective performance evaluation
This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

SR

Great course, I does complement the Managerial Accounting course I took before. A lot of tools to apply in the work place. The videos and the examples are wonderful for the learning pourpose.

BB

Mar 01, 2019

Filled StarFilled StarFilled StarFilled StarFilled Star

Although seems to be easy going it is actually quote complex subject but professor made it simple for understanding - great work U of I !!

À partir de la leçon

Budgeting for Planning and Control

At the heart of an organization’s planning and control function is its budget. In this module, you will explore the purpose of budgeting, the role of managers and employees in budgeting, and related implications. You will also develop an organization’s budget, ultimately understanding the iterative nature among the budget’s key components: the operations, financing, and capital investments budgets.

Enseigné par

Gary Hecht, Ph.D.

Associate Professor of Accountancy

Transcription

[ Music ] >> Now let's talk about the internal rate or return. The main approach here is that it calculates the discount rate at which the present value of expected cash inflows equals the present value of expected cash outflows. Basically the internal rate of return is the discount rate that makes the net present value of the project equal to zero. So let's turn to our example again. [ Pause ] >> It's the same type of investment of Hogarth. And, again, we're talking about Hogarth using acquired rate of return of 16% in its capital budgeting decisions. We also have some assumptions about the timing of cash flows and then occurring at year-end except for the initial investment amount. Now the internal rate of return is often calculated using technology. A financial calculator or a Microsoft Excel. Whatever financial tool you have can easily calculate internal rate of return. I won't show you all of the calculations that are going on, but I'll give you the essence of what is going on behind the scenes of these financial tools. Basically, internal rate of return is a trial and error type method. We calculate the net present value of the project at various levels of discount rate. So having gone through the previous calculations where I calculated net present value we're calculating net present value at a different rate this time, say 14%. I would calculate the net present value at 12%. [ Pause ] And I would calculate the net present value at 10%. This range of percentages is informed by what you think the approximate rate of return is on this project. When I calculate the net present value avoiding all these calculations in detail the end answer is $1,068 to the negative. That means that the project has a negative net present value at the 14% discount rate. Calculating the net present value of the project at the 12% discount rate yields $242 to the negative. So the net present value is still negative using a 12% discount rate. And when I calculate the net present value of the project that had a 10% rate via a series of calculations I would find out that the net present value using that rate is positive at $619. What this means is that the internal rate of return, which means it's the discount rate at which the net present value is zero is somewhere between 10 and 12% because I know that somewhere between those discount rates the net present value goes from negative amounts to positive amounts. To figure out the exact discount rate at which the net present value is zero I can interpellate between these two end points. So knowing it's at least 10% I can say what portion of the range between 10 and 12% lies above the zero point and what portion lies below it. And so I can calculate that via $619 in the numerator and the entire range in the denominator. That's the percentage of the 2% range between 10 and 12 that signals the point at which the net present value shifts from positive to negative amounts. If I multiply this entire ratio by the 2% range I can calculate that to be 10%, plus .719, times the 2%-- [ Pause ] Which is equal 11.44%. Now a financial calculator would have spit just this number out. But behind the scenes its basically running through a trial and error method to find out where the net present value is calculated as zero and that tells you what the internal rate of return is. So the 11.44% internal rate of return tells me where the net present value is zero. And it makes sense because when I calculated the net present value using the 16% discount rate it yielded a negative amount. Now let's talk about the advantages and disadvantages of the internal rate of return measure. First off, it takes into account the time value of money and it's cash based just like the net present value method. This one is also very easy to interpret. A lot of managers think in terms of percentage returns when considering different investment opportunities. And you can equate what you're saying about different opportunities and compare them very easily. Disadvantages are the same as the net present value method. There's a number of assumptions that are necessary to use internal rate of return and it is subject to uncertainty.